draft audit report 103113 w mgmt response - san antonio · 2014-01-08 · stephen s. penley, audit...

Distribution: Sheryl L. Sculley, City Manager Edward Belmares, Assistant City Manager Ben Gorzell, Chief Financial Officer Michael Sawaya, Director, Convention and Sports Facilities Department Robert F. Greenblum, City Attorney Leticia M. Vacek, City Clerk Jaime Castillo, Communications Director, Office of the Mayor Frances A. Gonzalez, Assistant to the Mayor, Office of the Mayor Edward Benavides, Chief of Staff, Office of the City Manager Donald Crews, Audit Committee Member Stephen S. Penley, Audit Committee Member

CITY OF SAN ANTONIO

OFFICE OF THE CITY AUDITOR

Audit of the Convention and Sports Facilities Contract for Audio/Visual and Rigging Services

Project No. AU13-004

December 20, 2013

Kevin W. Barthold, CPA, CIA, CISA City Auditor

Audit of the CSF and PSAV Contract for Audio/Visual and Rigging Services

City of San Antonio, Office of the City Auditor i

Executive Summary

As part of our annual Audit Plan approved by City Council, we conducted an audit of the Convention and Sports Facilities (CSF), specifically the contract between the City of San Antonio (City) and Audiovisual Services Group, Inc. d/b/a PSAV Presentation Services. The audit objective, conclusions, and recommendations follow: Are CSF and PSAV in compliance with contractual terms for Audio/Visual and Rigging Services? Yes, overall CSF and PSAV are both in compliance with contractual terms for audio/visual (A/V) and rigging services provided at the Henry B. Gonzalez Convention Center (Convention Center). PSAV is in compliance with both financial and performance terms specified within the contractual agreement. Overall, both parties are meeting expectations as specified in the contract. However, we identified some administrative processes that need improvement. Controls do not exist for ensuring that PSAV is in compliance with the contractual terms in the following areas:

1. Insurance coverage for subcontractors providing goods and services

does not exist. Note: Issue was remediated - CSF obtained a waiver from the City’s Risk Management department.

2. PSAV is not utilizing subcontractors appropriately as specified in the Good Faith Effort Plan. Additionally, CSF is not reviewing subcontractor proof of payment and the SBEDA compliance reports that provide detail of utilization levels and good faith efforts by PSAV.

We recommend that the Director of CSF:

Ensure that PSAV is in compliance with the pertinent terms of SBEDA by thoroughly reviewing required SBEDA compliance reports and requesting supporting documentation, such as subcontractor billing payments.

CSF Management’s verbatim response is in Appendix B on page 6.


City of San Antonio, Office of the City Auditor

Table of Contents

Executive Summary ............................................................................................... i

Background ........................................................................................................... 1

Audit Scope and Methodology .............................................................................. 2

Audit Results and Recommendations ................................................................... 3

Appendix A – Staff Acknowledgement .................................................................. 5

Appendix B – Management Response .................................................................. 6


City of San Antonio, Office of the City Auditor 1

Background

The City owns and operates, through the Convention and Sports Facilities (CSF) Department, the Henry B. Gonzalez Convention Center (Convention Center). The facility is made available to clients through short-term license agreements for a variety of events, including conventions, exhibits and meetings. Such events may require audio visual and rigging services and therefore the City sought to obtain an Audio Visual and Rigging Services contract for events held at the facility. The City submitted a request for proposals and subsequently awarded a contract to PSAV Presentation Services (PSAV) to perform preferred (non-exclusive) audio/visual services and exclusive rigging services for events held at the Convention Center. Audio/visual and rigging services include equipment, materials, and labor (i.e. lighting equipment, video monitors, professional technicians, programmers, etc.). The contract was awarded for a five year period beginning on May 1, 2011 and is due to expire on April 30, 2016. A renewal option of one consecutive three year term is available, subject to the approval of City Council. In consideration for the rights and privileges granted under this agreement, PSAV agreed to pay the City a percentage of gross sales as follows:

City Commission

Annual Gross Sales$0 ‐ $999,999 $1,000,000 ‐ 1,999,999 $2,000,000+

Initial Term 28% 29% 30%

Renewal Term 30% 31% 32%

If annual gross sales do not meet the percentages listed in the table above, PSAV has agreed to pay the City a minimum annual guarantee (MAG) amount per agreement year, as follows:

Minimum Annual Guarantee (MAG)

Agreement Year(May 1 to April 30)

A/V MAG

Rigging MAG

Total MAG

Initial Term

2012 $ 435,500 $ 125,000 $ 560,500 2013 $ 457,275 $ 131,250 $ 588,525 2014 $ 480,139 $ 137,812 $ 617,951 2015 $ 504,146 $ 144,703 $ 648,849 2016 $ 504,146 $ 151,938 $ 656,084

Renewal Term

2017 $ 529,353 $ 156,496 $ 685,849 2018 $ 561,591 $ 161,191 $ 722,782 2019 $ 578,438 $ 166,027 $ 744,465



Audit Scope and Methodology

The audit scope included contract terms and related documentation for the time period between May 2011 and April 2013. Testing criteria primarily included contract terms and City Administrative Directives. We interviewed CSF and PSAV management and staff and verified commission revenue and other pertinent information to ensure appropriate execution and monitoring of the contract terms. We relied on computer-processed data in SAP, the City’s principal accounting system, to validate payments submitted to the City by PSAV. Our reliance was based on performing direct tests on the data rather than evaluating the system’s general and application controls. Our direct testing included comparing source documentation to SAP. We do not believe that the absence of testing general and application controls had an effect on the results of our audit. We conducted this audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.



Audit Results and Recommendations

Lack of Internal Controls

Controls for ensuring that PSAV is in compliance with the contractual terms do not exist in the following areas:

1. Subcontractor Insurance Requirements

Section 20.4 of the contract states that PSAV agrees to require that all subcontractors providing goods or services obtain the same insurance coverages required of contractor, and provide a certificate of insurance and endorsement that names the contractor and the City as additional insureds prior to the beginning of any work by the subcontractor.

CSF remediated this issue during the audit by obtaining insurance waivers from the Risk Management Division. The waivers were issued to subcontractors who have no on-site presence.

2. Compliance with SBEDA Requirements

PSAV is not meeting the Small Business Economic Development Advocacy (SBEDA) requirements as stated in the contractual terms. Section 24.3.1 of the contract explains that failure of the contractor to utilize a SEBDA Enterprise (i.e. suppliers and subcontractors) that was originally listed in the Good Faith Effort Plan (GFEP) constitutes a material breach of the SBEDA Program and the contract. PSAV is not utilizing subcontractors appropriately as specified in the Good Faith Effort Plan. PSAV included 3 subcontractors on their compliance SBEDA reports that are not listed on the GFEP. In addition, a subcontractor listed on the GFEP is not being utilized. Additionally, CSF is not reviewing the SBEDA quarterly reports before sending them to the Economic Development Department. Formula errors and incorrect utilization goals were identified on the SBEDA quarterly reports. Section 24.2.5 of the contract requires PSAV to pay and provide documentation of all billing and payment information applicable to SBEDA Plan suppliers and subcontractors.



PSAV is not submitting subcontractor billing and payment information to the City, nor has the City requested such information from PSAV.

Recommendation The Director of CSF should: Ensure that PSAV is in compliance with the pertinent terms of SBEDA by thoroughly reviewing required SBEDA compliance reports and requesting supporting documentation, such as subcontractor billing payments.



Appendix A – Staff Acknowledgement

Sandra Paiz, CFE, Audit Manager Claudia Peña, CFE, Auditor in Charge Christopher Moreno, MPA, Auditor



Appendix B – Management Response

draft audit report 103113 w mgmt response - san antonio · 2014-01-08 · stephen s. penley, audit...

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